To Lease or Not to Lease?

You’re three years into your five-year lease, and life is good, right? But could it be even better if you started thinking now about what you’re going to do when the lease runs out? If you’re like most owners of closely-held businesses, space requirements will be one of the recurring problems that you’ll face as you continue to grow your business. How will you know whether to stay in your current space, move to new space, or even buy a building?

As your business develops, you may repeatedly face growing pains like these:

• Not having enough space for your needs.
• Whether the space is workable for your employees or operations over the long-run.
• Whether you might be missing opportunities to acquire space on a timely basis.

Sometimes it helps to discuss these concerns with a detached outsider. I discussed these issues and how our market affects the decision-making process with my good friend and colleague, Bill Colangelo, owner of Equity Commercial Real Estate Group. Bill has been working for over 26 years with clients who buy, sell, and rent commercial properties. Bill is a real estate broker, but he describes himself as an “advisor” rather than as a sales person or broker.

Many of Bill’s clients own growing businesses that are expanding operations and hiring more and more employees. They often ask Bill, “Should I lease, or should I buy?” Bill helps answer this question by first understanding the client’s business situation, needs, and goals.  Bill asks, “What are you hoping to do?”

Bill works with the client’s other trusted advisors to answer these questions at both a tactical and a strategic level. Buying isn’t always the best answer, for example, when a business is growing and will quickly need additional space. If your business is adding employees and expanding operations quickly, buying may force you to choose between outgrowing the new space quickly or buying lots of extra space that you can’t use, and may not be able to afford, immediately.

Even where growth is stable, Bill works with his client’s other trusted advisors to chart the best course. If, like many of Bill’s clients, you do not have unlimited capital, Bill will work with you and your team to satisfy your space needs using both limited capital and borrowing in the best way. The things that Bill helps you consider include not only price per square foot, but also layout, work-flow, and visibility. Bill uses his experience and expertise to help his clients and their advisors craft a plan for buying or leasing, or a combination of both, to find and use space that creates value.

Addressing how to satisfy your real estate needs involves the analysis of lots of factors, some of which are easy to quantify such as today’s interest rates. There are many others that are not as easy to quantify, like future appreciation and market trends. Lastly, but perhaps most importantly, Bill helps his clients consider the many emotional factors that will weigh on their decisions, like whether they’ll be proud to hang the first dollar that the business earned and that was framed so long ago in a new space.

Bill also brings market knowledge to which most of us don’t have access. Commercial lease rates and sales prices aren’t published and are not as readily available as residential information. Bill will educate you at the outset, and he’ll continue to help you update and refine the analysis of your situation, needs, and goals throughout the engagement. Bill will help you strategically narrow your focus and make good decisions from among the alternatives.

When a client may want to sell a building, Bill takes the same approach to understand the client’s situation, needs, and goals. Bill also works with his client’s other trusted advisors to help figure out the best approach and to make the transaction, like a 1031 exchange, work. Bill applies his experience and expertise to help his clients decide whether to sell a property and, if so, when.

Bill works closely with lenders, inspectors, and environmental consultants to anticipate and resolve problems that can come up during a transaction. He proactively explores the likelihood of encountering these problems and, if one comes up, takes the lead in planning and implementing ways to resolve them. He brings with him a stable of other qualified professionals to suit the needs of the transaction.

Many clients look to lease or buy property without using a broker. They may not know, however, that even if they’re not receiving the benefit of a broker’s representation they will end up paying part of the broker’s fee. A broker’s fee is paid by the landlord or the seller, and the broker’s fee will be reflected in the lease rates or the sales price. While the fee may not show up separately on an invoice or a closing statement, the tenant or the buyer ends up writing a check that includes the fee. So, if you’re paying for part of the fee, why not take advantage of the service a broker like Bill brings to the deal?

Bill is production driven, but he puts his client’s needs and interests first. Bill’s clients testify to many examples where Bill found the best property for them even though it meant that Bill’s fee would be lower. Like the other trusted advisors with whom I try to associate, Bill hopes to develop long-term relationships with his clients, and shared with me that the best way he’s found to create these relationships is to put the client’s interests first. One example of how Bill takes this approach is his practice of allowing any client to cancel any listing or brokerage agreement at any time, for any reason.

If you would like to meet Bill and speak with him directly about how his consultative approach to commercial real estate brokerage might meet your needs, contact me at 303-831-1411 so I can connect you.

 

The economy is humming, the signs are good for continued growth, and life is good.  If you own a business, this also means that you and your team are meeting all your numbers, your business is growing, and everything is working smoothly, right?  Too bad the state and national statistics don’t translate directly into sales and revenue on your books.

In these good times, do business owners still experience problems with lead generation, lead conversion and revenue growth?  If growth isn’t a problem, are most businesses performing up to their potential?  Are the teams that drive growth performing at their highest level?

I put these questions to my good friend and colleague, Robert Smith, President of Axcelerate, a consulting company that lends its marketing, sales, and business development expertise to produce specific financial results. Robert has created and sold four successful businesses and is a frequent speaker on how to create unique ideas and dominate market niches and business development topics to large audiences across the U.S. and abroad.

Robert says that he often hears business owners complain about lead generation, conversion, and growth, even in today’s booming economy.  He doesn’t, however, immediately suggest specific marketing tactics like digital marketing or direct lead generation campaigns.  He says that starting such a campaign would be like trying to drive a car with flat tires to Alaska without a GPS or even a map!

Robert proposes, instead, to first identify the problem the business faces, how the problem directly impacts the business, and why solving the problem is important? The “why” is much more important as it requires true and deep examination by the owner.

After defining the problem and why solving the problem is important, the business can design strategy and tactics with the best chance of solving the problem.  Robert summed up his approach bluntly, “Starting without a clearly defined destination and a way to get there is a complete waste of time.”

One solution may be to increase the number of leads the marketing program generates. Robert suggests that you should also consider whether the leads are qualified.  You may find, for example, that the conversion rate has suffered because the leads you’re starting with are not qualified.  What is your conversion rate as a percentage of qualified leads?

Another solution might be to analyze your current client base and classify them as either “A” clients, “B” clients, or “C” clients.  Profile each segment and ask, “Who are our “A” clients?  How do we attract more of them?  And, most importantly, why do we want them?”  Profile and ask this question about the other clients too.

Before you file your client list away, ask yourself if you’ve taken the time to tell these clients about other goods and services you offer?  They probably don’t know that you can help them in more ways than one.  A professional services firm, with Robert’s help, increased revenue by 60% – and margins by 80% – by focusing some of its business development efforts on existing clients.

Robert reminded me that existing customers already know you, like you and trust you and will buy from you again and again.  Existing clients also refer others.  Top-performing business development programs are intentional about nurturing and growing existing relationships.

Robert also suggests writing your “Unique Value Proposition” – an explanation of how your products or services provide extraordinary value that differentiates you from the competition. Robert helped a home builder develop a Unique Value Proposition that included a promise to buy back the house if the client wasn’t absolutely delighted.  The home builder’s business increased by 70% within 6 months after adopting this Unique Value Proposition!

Lead generation, lead conversion, sales, and revenue typically don’t improve without measurement.  Robert coaches business owners to define the key performance indicators (KPI’s) that matter and guides them on the path to reaching and exceeding their goals.

KPIs can include the percentage of conversions over the sales life cycle, the cost of acquisition per client, revenue per client, and profit per client.  Defining the lifetime value of a client tells how much you can spend to acquire that client.  For example, Robert relates the experience of a plumbing repair company that found that an average client paid them $ 900 per year and used the company for an average of 5 years.  Using the company’s 30% margin, it had a way to measure how much it could spend to acquire a single new customer.

Robert shared that he enjoys every chance to bring his proven creative talents, and those of his firm, to a client engagement.  If you’d like to meet Robert, or if you’d like some ideas about whether your team can experience its own business development successes, please feel free to call me at 303-831-1411.

Are you ready to talk taxes? If you’re running a successful, privately-held business, taxes aren’t the topic for lunch conversation that’s at the top of your list. It may not even rank at the bottom of the list.

I am sure you will agree that a meeting with a tax advisor who recites the Internal Revenue Code is as enjoyable as getting a root canal. Reviewing the bills to see how much you paid for the pleasure of listening to these recitals may also make you cringe.

In my experience, a professional and effective tax advisor helps with you tax-related management, transaction, and cash flow issues, while also being personable and easy to talk to. This is what you can expect from my good friend Dan Giordano, partner at DCG PC, an accounting firm focused exclusively on tax consulting and compliance.

Start with the Basics

For most businesses, the starting point for effective tax consulting involves the owner, the overall business history, the assets used in the business, and the other things that the owner has. Dan helps analyze, in co-consultation with a business lawyer, the business entities currently being used by the owner to conduct the business and related assets, such as real estate. Many of Dan’s clients have 2 or more business entities, including an operating entity and a real estate entity.

For some clients, correcting some of the tax-related mistakes that were made early in the life of the business can take several years to correct. For example, a complete change from being taxed as a “C” corporation to a flow-through “S” corporation takes at least five years. Other fixes, such as separating rental real estate into a separate legal entity, apart from the operating assets of a business, can be accomplished more quickly.

Build a Solid Team

Dan advises that you need to insure you have an engaged and solid record keeper (sometimes called “bookkeeper”) to receive, process, and store records and to create a data source from which Dan can provide effective analysis and consultation. A good record keeper also helps Dan’s firm to be more efficient by using electronic data interchange to begin the compliance function. By making the data-collection and entry process easy, efficient, and error-free, Dan can focus on giving you tax savings, where appropriate. Most clients experience some immediate savings because of Dan’s ability to zero in on things like timing and tax brackets.

The client controls the level of involvement with Dan’s firm, depending on the situation and the other members of the client’s team. For some clients, Dan provides a full spectrum of tax consulting and compliance services. Dan provides training and consultation for record-keepers, controllers, and financial managers. For other clients who are more involved in their company’s finances, Dan provides mostly compliance services with limited consulting services.

As the relationship matures, Dan devotes the necessary time and resources to learn the client’s tendencies and risk tolerance. This familiarity builds a lot of value because Dan can anticipate the character and timing of the client’s transactions and help his clients plan and react accordingly. Dan tells me that an intimate knowledge of a client and the client’s business provides the best value when the client is selling or transferring all or a part of their business because he can help plan for and execute the transaction in a tax efficient, secure, and beneficial way.

Build Trust

Needless to say, developing this kind of relationship takes a significant investment by both Dan and the client. Trust must exist on both sides of the relationship. To be a valuable advisor, Dan must be able to ask the right questions to provide you with the insights you need to complete a successful transaction.

I mentioned earlier that Dan’s firm focusses exclusively on tax consulting and compliance. Since they only provide tax services, they can focus on the records that others prepare and “zero-in” on issues and planning rather than providing retroactive CYA activities.

Dan’s been around, having practiced for over 20 years, and has acquired amazing clients. Some of his first clients are still with him, and the legacy continues with the children of these clients. Dan knew his passion for helping clients with tax consulting when he was in high school, and he worked in industry for 4 years before he even sat for the CPA exam.

90 percent of Dan’s clients are now friends and he takes the time to have a beer and talk about life and business. In addition to mutual trust, Dan enjoys his client’s personalities and their unique businesses. Aside from being a friend, Dan’s perfect client is a business owner with a complex tax situation that requires planning and professional consulting and who is looking to invest in a relationship to receive a lot of value.

If you’d like to meet Dan, or if you’d like some ideas about candidates with these skills to serve on your advisory team, please feel free to call me at 303-831-1411.

Steve Bush, attorney at law, founded Steven M. Bush, a Professional Corporation in 2003 in Littleton, Colorado. The firm specializes in representing privately-held businesses and their owners on a range of legal matters.

Chances are, if you’re like most busy business owners, you’ve probably thought about some level of financial planning or even planning for your retirement. If finding or working with a financial advisor isn’t on your “Important and Urgent” list…it needs to be.

Does your team of trusted advisors include someone who helps you manage your assets as well as your obligations and helps guide you when you’re making critical financial decisions?

Why is this important? Financial planning is important because your current and future lifestyle depend on it. Most of the people we admire put others before themselves. But that doesn’t mean that you should never think about what’s good for you. You should be very interested in maintaining and improving your lifestyle now and in the future.

Why is this urgent? The lifestyle you will enjoy during your retirement, regardless of how active you are, will depend on how you envision and plan for it today. You should plan with the end in mind, and the lifestyle you enjoy during your retirement will also depend on the lifestyle you choose to enjoy today. The decisions you make today or tomorrow will affect you for decades to come.

I am sure you will agree that, after your health and family, the thing that you could never afford to lose is your wealth!

So, finding a wealth advisor that will look after your best interests and help make your dreams for your future lifestyle a reality should be paramount in your mind right now.

Finding this most special person to trust with your fortune and your future may seem a bit elusive and concerning. You may be asking yourself, “How can I find this person and what type of questions should I be asking them?” My good friend Lee Davis, Managing Director of JL Davis Financial, an advisory practice of Ameriprise Financial Services, Inc. graciously spoke with me about these and many other questions you may have. Lee has been successfully advising clients for over 41 years, and Lee leads a multi-generational team including his son and partner Jeremy L. Davis, CFP that provides financial planning and wealth management services for business owners. Some of Lee’s clients include the grandchildren of clients with whom he’s been working for decades.

Lee suggests, instead of just asking questions at first, starting by imagining your future – beginning with an end in mind. By helping you define your monetary and retirement goals and painting your retirement picture, a wealth advisor can work with you to make a solid plan to achieve your goals.

An early-stage plan might focus, for example, on stabilizing cash flow and identifying cash that might be available to for savings or investment. Even at an early stage, it is important for the advisor to help you assess your appetite for risk and to allocate and diversify your portfolio accordingly.

As an example, many business owners think that the best way to build value for their retirement is by amassing cash and keeping all their liquidity in their business. This isn’t usually the best strategy. A better plan may include making savings a part of your salary calculation, as well as part of the compensation for other employees, from the very start.

The typical owner’s mindset is wired to put off the reward and keep money in the business. Adequate liquidity in a business is important, but Lee cautions against keeping too much money in the business at the expense of personal savings and investments. This practice is unsustainable, leading only to hardship down the road from a variety of tax and legal issues that may impact you at retirement.

As your business grows and changes, so should the guidance you get from your wealth advisor. Each business stage is dynamic, according to Lee, and requires its own approach for maximizing and optimizing wealth. Say for example, you want to bolster talent retention by increasing benefits for the stellar employees you acquired with your excellent starting compensation package. Doing so requires the strategic allocation of assets to ensure they receive the financial rewards that keeps everyone happy over the long term…this includes you too.

Lee pointed out that having a trusted wealth advisor during the early phases of a business is vital. Having that trusted advisor when you sell or transition the business to family, employees, or third parties is equally crucial. A solid proven wealth advisor can help with special tax considerations that arise during these times, and can also help smoothly guide a change of hands. When a business passes from one family generation to another, the wealth advisor relationship that is attached to it pass along with it, lending familiarity and security to the transition and for the future of the operation.

I asked Lee if there are any specific characteristics to look for in a wealth advisor, and he delivered his top three:

• Experience
• A strong team
• Compatibility

When choosing someone to manage your wealth, you want to be sure they have significant experience. No matter how experienced, though, this person should be surrounded by a competent, collaborative team of people who aim to best serve your needs. Finally, they should have a strong history of serving people like you. That way, the advisor is more likely to be compatible and anticipate your needs.

If you would like to meet Lee and speak with him directly about how financial planning and wealth management can serve your needs, contact me at 303-831-1411 so I can connect you.